David Herro
WATCHHarris Associates (Oakmark International Fund)
Premier international value stock-picker with 30+ year track record but moderate concentration and limited AGI awareness.
International Value Investors
Score Breakdown
Investment Philosophy & Portfolio Style
Philosophy
Herro is a classic bottom-up value investor applied to international markets. He seeks companies trading at significant discounts to his estimate of intrinsic value, typically 30-40% below what he believes a company is worth. He focuses on three key elements: (1) a strong competitive position or business franchise, (2) management that acts in shareholders' interests and allocates capital wisely, and (3) a stock price meaningfully below intrinsic value. He is willing to hold through volatility and has conviction in concentrated positions. He emphasizes understanding management quality and corporate governance, which is especially critical in international markets where governance standards vary widely. He looks for catalysts that will close the gap between price and value, such as management changes, restructurings, or improved capital allocation. Unlike many international managers, he does not make top-down country or macro bets. He is a patient, long-term holder who averages holding periods of 3-5 years.
Portfolio Style
Moderately concentrated for a mutual fund — typically 40-60 holdings in the Oakmark International Fund, with the top 10 positions often representing 35-45% of the fund. He runs a benchmark-agnostic portfolio and is willing to have large overweights and underweights relative to the MSCI EAFE index. Geographic allocation is purely a byproduct of bottom-up stock selection. He has historically had significant exposure to European financials (banks, insurance companies) and consumer staples/luxury goods companies. The portfolio is mostly large-cap with some mid-cap exposure. He does not hedge currency risk, believing that over long periods, currency effects wash out. AUM for Oakmark International Fund has been significant, in the range of $20-30 billion at various points.
Background
David Herro is the Chief Investment Officer of International Equities at Harris Associates, the investment advisor to the Oakmark Funds. He has managed the Oakmark International Fund since its inception in 1992 and co-manages the Oakmark International Small Cap Fund. Herro earned a B.S. from the University of Wisconsin-Platteville and an M.A. in economics from the University of Wisconsin-Milwaukee. Before Harris Associates, he worked at the State of Wisconsin Investment Board and Principal Financial Group. Morningstar named him International Stock Fund Manager of the Decade in 2010, a remarkable recognition spanning 10 years of consistent outperformance. He is widely regarded as one of the premier international stock pickers alive today, with over 30 years of continuous management of the same fund.
Track Record
Exceptional long-term track record. The Oakmark International Fund has significantly outperformed the MSCI EAFE index since its 1992 inception, generating approximately 10-11% annualized returns versus roughly 6-7% for the benchmark over that period. This outperformance earned him the Morningstar International Stock Fund Manager of the Decade award in 2010. However, more recent performance (2015-2022) was more mixed, with value style headwinds and some individual stock misjudgments (notably Credit Suisse) creating periods of underperformance. The fund suffered in 2020 during COVID but recovered strongly in 2021-2022 as value stocks rallied. His track record over 30+ years remains one of the strongest in international equity investing. His ability to add value has been demonstrated across multiple market cycles, including the dot-com bust, GFC, and European debt crisis.
Notable Holdings
Historically significant positions have included: Daimler/Mercedes-Benz, Credit Suisse (a notable loss when it collapsed in 2023), Glencore, BNP Paribas, Bayer, CNH Industrial, Reckitt Benckiser, Allianz, Intesa Sanpaolo, Lloyds Banking Group, Samsung Electronics, and various European luxury goods companies. He has shown a willingness to invest in financials and industrials that other investors avoid. More recently he has held positions in GSK (GlaxoSmithKline), Rolls-Royce, and other European industrials benefiting from restructuring.
Transparency & Integrity
Transparency(Score: 6/10)
Reasonably transparent for a mutual fund manager. Oakmark publishes quarterly commentaries where Herro explains his positioning and rationale. Holdings are disclosed quarterly per SEC requirements. He gives periodic interviews to financial media (Barron's, Morningstar, Bloomberg) where he discusses his views on specific holdings. Harris Associates publishes detailed investment philosophy documents. However, real-time transparency is limited compared to investors who write detailed annual letters.
Integrity(Score: 8/10)
High integrity. He has a long track record of sticking to his stated investment philosophy even during difficult periods. During the late 1990s tech bubble, he refused to chase momentum and maintained his value discipline, which cost him short-term performance but proved correct long-term. He has been candid about mistakes, including acknowledging misjudgments on specific stocks. He has managed the same fund for over 30 years, showing commitment. He has significant personal investment in his own funds, aligning his interests with shareholders. No known ethical controversies or regulatory issues.
Relevance to Us
Moderate relevance. His value approach and emphasis on intrinsic value and downside protection aligns well with our philosophy. His bottom-up approach and focus on management quality are compatible. However, his international-only focus means his portfolio won't overlap much with our likely US-focused opportunities. His portfolio concentration is moderate (40-60 names) — more diversified than our ideal. His fund size creates constraints we don't face. He is useful as a source of ideas for international companies and as a model for how to apply value investing principles in foreign markets. His Credit Suisse loss is instructive on the risks of financial companies with governance issues. His 30+ year track record provides valuable lessons on maintaining discipline through adverse conditions.